E-residency will be introduced in Ukraine

In 2023, Ukraine will introduce e-residency. The Ukrainian parliament passed the corresponding bill in its second reading. Let's explore who can obtain this special status and what it entails.

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Ukraine is waging a full-scale war, so it's more important than ever for our country to support the economy and attract additional budget funds. The project's initiators studied the experience of Estonia, which has become a role model in the provision of electronic government services.

The transition to a digital environment allows for significant savings: in the first five years of its implementation, the Estonian state budget received €25 million in direct revenue. Now, one of the three Baltic countries will have a worthy competitor in Ukraine.

What is e-Residency?

This is a special status that allows foreign entrepreneurs to open their businesses in Ukraine and pay taxes without being physically present in our country.

E-residency is an opportunity for foreigners to “transfer” their business to Ukraine in a few clicks without the need for a physical presence in our country.

This is an excellent option for those entrepreneurs who, despite the challenging economic and geopolitical situation, have the opportunity to work with developed civilian markets and protect their income.

They will be able to quickly and conveniently register and open bank accounts through a browser on a laptop or directly on their smartphone. Without bureaucracy and without paperwork.

The bill on e-residency was approved by the Verkhovna Rada

On October 6, 2022, the Verkhovna Rada of Ukraine adopted in its entirety draft law No. 5270 “On Amendments to the Tax Code of Ukraine and Certain Other Legislative Acts of Ukraine on the Specifics of Taxation of Entrepreneurial Activities of Electronic Residents.”

The introduction of e-residency is another step toward building a strong Ukrainian IT brand. I plan to grant this status to 1,000 entrepreneurs within a year.

According to Minister Mikhail Fedorov, the Ministry of Digital Development, Communications, and Mass Media team is already developing a web version of the service and a mobile app using cloud-based digital signature technologies.

What can foreign entrepreneurs expect?

Thanks to the new law, foreign businessmen will be able to:

• obtain the status of a Ukrainian e-resident;
• register as a group 3 sole proprietor without physical presence in Ukraine;
• pay a single tax on favorable terms: 5% of the income amount or 15% of the amount exceeding the limit (but only external contracts for the export of services);
• open bank accounts online for business activities;
• complete all documents electronically, conduct correspondence with the traffic police online, and carry out all mutual settlements by bank transfer;
• develop and expand your business remotely.

The Ministry claims that taxation and reporting processes for e-residents will be automated. This will simplify the process of filling the state budget and accelerate the development of our country's digital brand.

E-residency is not citizenship

E-resident status provides foreign entrepreneurs with the opportunity to:

• legally carry out business activities in Ukraine and abroad as a sole proprietor;
• use convenient modern online services in your work;
• take advantage of the opportunities and benefits that the state provides to Ukrainian sole proprietors.

It is important to understand thatobtain e-residency≠obtain citizenship of our country.E-resident status does not constitute grounds for obtaining a temporary or permanent residence permit in Ukraine.

Who will not be able to obtain e-Residency?

According to the bill's author, Yaroslav Zheleznyak, not all foreigners will be able to acquire special status.

E-residency will not be granted to Russian citizens, individuals blacklisted by the Financial Action Task Force (FATF) (an intergovernmental organization that develops global standards to combat money laundering and terrorist financing), or entrepreneurs who already have income in Ukraine (other than passive income).

In general, the list of countries whose citizens can become e-residents of Ukraine is determined by the Government.

What specialties are a priority?

IT specialists will be the first to receive Ukrainian e-residency:

• programmers;
• game and other software developers;
• network administrators, etc.

Over time, the list of areas of activity will expand, providing opportunities for other representatives of the creative economy to develop their businesses.

According to representatives of the Ministry of Digital Development, the list of e-resident professions will be expanded by the second reading of the bill: in the future, it will be available not only to IT specialists but also to other service exporters.

How to become an e-resident?

You must undergo verification at the consulate and submit an application on the e-Residency portal. After all verifications, the foreign businessman will be granted legal e-Resident status.

From the moment it is received, the entrepreneur will have access to all the online tools necessary for doing business in Ukraine.

In fact, he will become an electronic payer of a single tax on group 3 without VAT, will receive a TIN and his electronic digital signature (EDS).

The procedure for obtaining this e-resident status

1. You need to register with “Dii”, submit an application, and undergo financial monitoring and a security check (the information will be checked by the Ministry of Internal Affairs and the Security Service of Ukraine).
2. If the application is approved, the foreigner will receive the status of an electronic resident.
3. After this, he will be able to remotely open a bank account (the bank will be the tax agent for the e-resident).

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